Photonics companies must follow a plan of preparation, reorganization, and automation in order to thrive in the next economic phase.

Technical optics as an old-economy field has turned out to become a new-economy field called photonics. Several industrial nations have recently conducted strategic studies that suggest that the field of photonics bears an extraordinary market potential for the future. In the past few years, the industry has shown astonishing growth rates. Stock exchanges and analysts have reacted to this potential, and the values of photonics companies have increased tremendously due to the high expectations set.

The success of the photonics industry is based on solutions that would not be possible without optical technologies. Such examples include continuously decreasing the size of structures in microelectronics and significantly increasing communications data rates and the rates of high throughput screening processes for biotechnology applications. In the boom-cycle enthusiasm of the past several years, however, industry observers recognized that new, high-volume markets are hardly predictable. Naturally, it is very difficult to foresee how many customers will make use of a new capability. This effect is evident in the telecom industry, in which the combination of both hardware solutions and service offers—and especially the acceptance of these services by the public—is essential for a successful market development.

The semiconductor industry suffers remarkable market oscillations in spite of a high average growth rate. Such forecast uncertainties have led to substantial misjudgments of the future market situation. Capacities are designated at a low level over a long period and thus cannot meet demand. After a time lag, the capacities reach the desired level, by which time the markets are already in a slump again.

Today we face a strong downturn in the cyclic semiconductor and telecommunications markets. Moreover, the weak world economy is spurring the industry to reduce investments in all areas, including laser, medical, and biotechnologies. Dramatic personnel reduction and reorganization programs, especially in the telecom field, are implemented as a reaction to the critical market situation.

These layoffs obviously will cause severe problems when the markets go up again next year. Know-how gets lost when jobs are lost: Not only are semi-skilled workers laid off, but also engineers. Suppliers in the photonics field are hit even harder as their customers have too many products in stock. In some cases, manufacturers are reducing production to zero, with the associated staff reductions.

Seize the moment

What has to be done? Management should use this period not only for reorganization and downsizing processes but also for the vigorous development of future technologies. There is no doubt that the cyclic markets mentioned above will be major drivers in the future of photonics. Companies have to be prepared for a new soaring growth so that they can take advantage of the inevitable upturn.

The automation of production processes is a crucial topic to consider for photonics’ future. Automated processes allow improved flexibility and higher output with lower personnel costs. Furthermore, capacities can be built up more easily. The rate of automation in photonics companies is still quite low; therefore, there is a good opportunity for development in this field. Moreover, I am convinced that we have to face this challenge in order to stand up to the coming pressure in pricing.

Another element to consider is the development of new products and production processes. The road maps are well-known in many fields. Manufacturers should focus on the development of new products during economically weak periods, for these are the products that will induce the next boom.

The managers of photonics companies should devote their time to some basic subjects. The industry has to close the gap in some essential areas, including rapid prototyping, mass production of micro-optical components, production of micro devices, and automation of assembly processes. Only when we meet these challenges will we be able to find promising solutions for the strongly cyclic markets and to take advantage of the options for recovery that these markets offer.